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Monthly Archives: September 2013

Blau & Malmfeldt is investigating David F. Mickelson, a former registered representative of the Oceanside, California brokerage firm NFP Securities, Inc., in connection with his sale of securities in Micro Pipe Fund I, LLC, a private investment company. It is possible that defrauded investors may be able to recover portions of their losses by pursuing claims against Mickelson and NFP in arbitration.

In April 2013, the Financial Industry Regulatory Authority (FINRA) filed a complaint against Mickelson, who was registered with NFP from 2004 to 2011. FINRA’s complaint alleges wrongdoing on Mickelson’s part in connection with his promotion of Micro Pipe Fund.

Specifically, FINRA alleges that Mickelson “established, promoted, and managed” Micro Pipe Fund and raised more than $8.3 million from 71 investors and collected $944,000 in his capacity as manager of Micro Pipe Fund without disclosing this activity to NFP. This practice, known as “selling away,” is a violation of FINRA’s rules, which require that brokers reveal any outside investments to their firm.

FINRA rules also require broker-dealer firms to maintain supervisory systems reasonably calculated to detect violations of FINRA rules on the part of their registered representatives. It appears that NFP may have failed to adequately supervise Mickelson and that NFP may have either ignored, or failed to identify as a result of a lack of reasonable diligence, numerous obvious red flags.

Mickelson also participated in six other private securities transactions that were outside the scope of his firm, signing private placement agreements and checks for these investments. He was the manager and part-owner of Hannahlu Ventures, LP, signing private placement agreements and checks for investments with the Nutmeg Fund/Michael Fund, LLLP; the Nutmeg/Fortuna Fund; LP; the Nutmeg/Patriot Fund, LLLP; and his own Micro Pipe Fund. He also made investments in Lone Wolf, Inc. through DFM Agency, LLC, which was owned entirely by Hannahlu Ventures.

The complaint, which is pending, claims that while acting in his capacity as the managing member of his investment fund entity, Mickelson provided his investors with monthly balance sheets and investor account statements that were “false and misleading.”

For example, the Micro Pipe Fund included in its October, November and December 2007 monthly balance sheets and investor account statements a $90,000 investment that had not been received. Micro Pipe Fund also falsely valued shares in a company called Yinlips Technology, Inc., at $245,454.30, when in actuality the shares had no market value.

Mickelson circulated a brochure about the Micro Pipe Fund to potential investors that contained incomplete, misleading and oversimplified statements. Mickelson used four unapproved email accounts to send and receive securities-related email messages.

FINRA’s complaint also alleges that Mickelson and members of his immediate family owned or controlled 15 brokerage accounts at other broker-dealers, including SMH Capital and Aegis Capital. Mickelson did not disclose his relationship with NFP to the other broker-dealers, and did not inform NFP about the accounts in his annual certifications. FINRA has demanded that Mickelson be ordered to disgorge any and all “ill-gotten gains” with interest.

Mickelson’s victims who were sold interests in the Micro Pipe Fund, the Nutmeg Fund/Michael Fund, the Nutmeg/Fortuna Fund, and the Nutmeg/Patriot Fund may be able to recover a portion of their investment losses by pursuing claims in arbitration against Mickelson and NFP.

Please contact Blau & Malmfeldt at 312-443-160, or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com for a no obligation consultation. Blau & Malmfeldt is a law firm that represents investors throughout the United States in securities, commodity futures, partnership and shareholder rights disputes.

The Financial Industry Regulatory Authority (FINRA) recently cautioned investors about the risks associated with private placement securities. Private placement securities are those that do not need to be registered with the Securities and Exchange Commission (SEC) because they conform to a registration exemption under the Securities Act of 1933, most commonly the exemption set forth in Regulation D. Private placement offerings marketed by securities broker-dealer firms to retail customers have come under a great deal of scrutiny in recent years.

Generally, private placements can only be sold to accredited investors, those who have a net worth over $1M or annual income over $200,000. However, a recent change in securities laws may allow for these securities to be sold to non-accredited investors through crowdfunding and other means.

FINRA has found that the private placement memorandums and other marketing materials used in connection with the sale of private placements are often inaccurate and misleading. These offering document typically include clauses that remove any obligation for the company to buy the securities when the investor wants to sell them. As there are typically no markets for private placement securities, these investments are typically illiquid. Brokers often market private placement securities as income generating investments to retirees, but because of the risks associated with these securities and their illiquidity, they are often unsuitable for retirees of relatively modest means who rely upon their investments to generate income.

FINRA suggests that investors do six things before making any investment in private placements:

Ask yourself when you would need to liquidate the asset. If you need to liquidate the investment before the terms of the security, do not buy the security.

Examine the risks. What industry is the company in? Who are its competitors? What are the chances the company doesn’t make a profit? You should try to know as much as you can about the company before you make an investment.

Ask your broker about the company’s risks. If your broker doesn’t know a lot about the company, it’s a red flag that the investment isn’t suitable for your circumstances.

Ask for the PPM and all marketing documents. These documents should be consistent. If you notice any discrepancies in the company’s accounting or any exaggerated financial claims, you should be cautious.

Check for contingency clauses. The company should only be able to access the investment money after investors commit a certain amount of capital. If the company can access investment money right away, it’s a sign they’re using investment money to pay everyday expenses.

Don’t trust cold calls or emails! Almost all investments solicited through cold calls and emails are fraudulent.

If you believe that your broker misled you about the risks associated with private placement securities, or recommended that you concentrate your savings in risky private securities, please call Blau & Malmfeldt at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com. Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.

The SEC has alleged that Richards committed fraud by promising investors that the funds provided to him would be invested safely in life insurance, fixed income annuities, and blue chip stocks. Richards, it appears, instructed investors to write checks to fake companies like “Blake Richards Investments” or “BMO Investments,” and then misappropriated the proceeds. It appears that Richards misappropriated more than $2M of investor proceeds.

The SEC has also alleged that Richards used LPL letterhead to make official looking, but fake, account statements which he transmitted to his clients. It also appears that Richards produced cashier’s checks, personal checks, and deposit slips when his clients tried to liquidate their investments.

Richards was a registered representative of LPL, the largest independent securities broker-dealer firm in the United States from May 2009 until May 2013. Richards was previously registered with Ameriprise Advisor Services, Inc., another large, independent broker-dealer. LPL and Ameriprise had a duty to supervise all of Richards’ outside business activities and it appears that they failed miserably in this respect.

If you were victimized by Blake Richards, you may be able to recover a portion of your losses against LPL or Ameriprise through a FINRA arbitration proceeding. Please call Blau & Malmfeldt at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to schedule a free consultation. Blau & Malmfeldt is a law firm that represents investors across

In July 2013, the Financial Industry Regulatory Authority (FINRA) initiated a disciplinary proceeding against Tony Thompson and TNP Securities, LLC (TNP Securities). FINRA has alleged that Mr. Thompson and TNP Securities committed fraud in connection with the sale of securities in various affiliates of Thompson National Properties (TNP). TNP was the entity through which Mr. Thompson intended to conduct business as a large scale commercial real-estate investor.

Beginning in June 2008, TNP set up a series of guaranty notes programs, including TNP 12% Notes Program, TNP 2008 Participating Notes Program, and TNP Profit Participation Program to raise money for TNP’s real estate investments. These notes promised high interest payments – between 9% and 13% – as well as an explicit guaranty from TNP to make interest and principal payments to investors.

According to FINRA, TNP and Mr. Thompson went to considerable lengths to conceal TNP’s financial condition from investors. For example, TNP continued to use financial statements from April 2008 (i.e., before the financial crisis) to sell TNP through 2010, despite the fact that TNP began to suffer massive losses in late 2008.

In October 2010, TNP asked investors in the TNP 12% Notes Program for authorization to use investor funds to cover operating costs of TNP and associated programs. As TNP’s network of real estate investment funds continued to collapse, TNP used funds from the 12% Notes Program and the 2008 Participating Notes Program to make loans to a completely separate entity which would eventually declare bankruptcy. These programs also began to use new investor funds to make interest and principal payments to older investors without the knowledge or consent of investors.

TNP also sponsored various limited liability companies and trusts in which equity interests were sold to retail investors. SEC reports show that TNP Vulture Fund VIII, LLC was incorporated around July 2008 and would sell over $9 million of its planned $48 million offering. TNP Irving Square, DST (a business trust) was incorporated around July 2010 and sold $4.6 million of its planned $5 million offering. Both of these funds fared poorly.

It appears that many brokerage firms continued to sell private securities in TNP related entities despite the existence of many obvious red flags surrounding these investments. Regardless of these problems, TNP investments did not make any sense for many investors because of their inherent risk.

A class action lawsuit was recently filed against Berthal Fischer & Company Financial Services (Berthal Fischer), a securities brokerage firm that sold TNP investments. The class action complaint alleges that Berthal Fischer misrepresented TNP’s financial condition in connection with its sale of TNP investments and that it failed to conduct adequate due diligence before recommending and selling these investments.

While class action lawsuits make sense for certain investors – particularly those who made very small investments – they generally result in settlements of pennies on the dollar. Many investors will fare much better by pursuing claims against their brokers in arbitration.

If you have suffered losses in a TNP investment and would like to learn more about your recovery options, please call Blau & Malmfeldt at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com. Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes.

Blau & Malmfeldt is currently investigating SCI Real Estate Investments, LLC (“SCI Real Estate”). Founded in 1994, SCI Real Estate raised money from investors in recent years through tenant-in-common programs and through the issuance of securities by various affiliated entities. Numerous brokerage firms sold SCI Real Estate investments to their retail brokerage customers.

The SCI Capital Group Mezzanine Fund (the “Mezzanine Fund”) appears to have been troubled from the very beginning. The Mezzanine Fund never invested in real estate but rather in unsecured loans to SCI Real Estate and its affiliates.

In February 2011, SCI Real Estate and its affiliates filed for bankruptcy in the U.S. Bankruptcy Court for the District of California. In June 2012, the court approved the trustee’s plan of liquidation. Investors who were sold SCI Real Estate investments have recovered only fractions of their investments through the bankruptcy proceeding.

SCI Real Estate’s various investments were always quite risky. Many brokerage firms misled their customers about the risks. It also appears that many brokerage firms failed to perform adequate due diligence before recommending and selling SCI Real Estate Investments to their customers. Brokerage firms are required to perform due diligence before recommending private securities offerings.

If you believe that you were misled about the risks of a SCI Real Estate Investment, or if your broker recommended that you concentrate your savings in real estate investments, it is possible that you may be able to recover your losses by pursuing a claim against your brokerage firm in arbitration.

Contact Blau & Malmfeldt at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to discuss your recovery options. Blau & Malmfeldt is a law firm based in Chicago that represents investors across the United States in disputes with securities industry members.

It may be possible for victims of Grifphon Asset Management’s multi-million dollar Ponzi scheme to reclaim investment losses by pursuing FINRA arbitration claims against securities brokerage firms and securities brokers that sold investments in Grifphon funds, including the Grifphon Alpha I Fund.

After being fired from his securities firm in 2000, Yusaf Jawed began over a decade long run of fraud under the Grifphon Asset Management name. Jawed used phony marketing materials, audit reports, and tax statements to claim that Grifphon’s funds were making double or triple digit returns on their investments. At one point in 2010, Jawed claimed to manage $63 million in assets for 150 investors. In reality, Grifphon made few investments. Most of the money went to finders fees, broker fees, transfers to Jawed’s personal accounts, and other schemes. Jawed claimed that transfers to his personal accounts were investments in “off-shore” bonds, when in fact he was using investor money to finance his lifestyle. In 2008 Jawed set up a shell company to further his schemes with his friend Lyman Bruhn that claimed to want to buy out Grifphon’s hedge funds.

The SEC brought fraud charges against Jawed on September 21, 2012. Jawed pled guilty to 17 counts of mail and wire fraud in April 2013, and agreed to a $34 million settlement to resolve civil charges against him. After Jawed completes his expected 6 ½ year prison sentence, he will likely have 10% of his income garnished by the government to pay off the $34 million civil settlement and $6.7 million in fines charged against him in the criminal case. He is also banned for life from working in the securities industry.

There is little chance that Jawed will be able to compensate investors for his crimes. Investors recently took action in a class action suit against Grifphon’s accountants and lawyers to recoup some of their losses. Jawed is also cooperating with the SEC as they investigate parties associated with Grifphon.

Pursuing FINRA arbitration against their securities brokers is another option investors have to receive restitution for their losses in Grifphon funds. Brokerage firms have an obligation to perform due diligence on the securities they sell and have a fiduciary duty to their clients. One recent arbitration decision resulted in a $130,095 arbitration award on a $230,105 claim against Raymond James Financial Services for selling an investment in the Grifphon Alpha I Fund.

If you were a victim of the Grifphon Ponzi scheme, you may be able to recoup some of your losses in FINRA arbitration. Blau & Malmfeldt is a law firm that represents investors across the United States in securities, commodity futures, partnership, and shareholder rights disputes. Please call us at 312-443-1600 or email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to schedule a free consultation or learn more about the services we offer.

On August 23, 2013, the Securities & Exchange Commission (SEC) filed a lawsuit against former Securities America, Inc. broker Larry J. Dearman in federal court in Oklahoma. The SEC has alleged in its complaint that Dearman sold securities in companies that he controlled and then used the proceeds to pay gambling debts, personal expenses, and Ponzi payments to earlier investors. The SEC alleges that Dearman was able to lure many victims who knew him as a wedding singer and as an active member of his church.

The Financial Industry Regulatory Authority’s (FINRA) records indicate that Dearman was associated with Securities America, Inc. between January 2009 and February 2010. FINRA’s records also indicate that Dearman was associated with Cambridge Legacy Securities, LLC between February 2010 and May 2012, and with Brecek & Young Advisors, Inc. between February 2005 and January 2009.

FINRA rules required the brokerage firms with which Dearman was associated to supervise any of his outside business activities. It appears that these brokerage firms may be liable for losses suffered by Dearman’s customers as a result of their failure to adequately supervise Dearman.

If you suffered losses through investments sold by Dearman, we encourage you to call Blau & Malmfeldt at 312-443-1600 or to email Paul Malmfeldt at pmalmfeldt@blau-malmfeldt.com to discuss your recovery options. Blau & Malmfeldt is a law firm based in Chicago that represents investors across the United Sates in disputes with securities industry members.